United States: Third Circuit Rejects Effort At End Run Around The Ascertainability Requirement

We previously wrote about the Third Circuit's decision
in Carrera v. Bayer Corp., which reversed a
district court's class-certification order because there was no
reliable way to ascertain class membership—indeed, no way to
identify who was a member of the class aside from a class
member's own say-so. Last week, the full Third Circuit denied (pdf) the plaintiff's
request to rehear the case en banc over the dissent of four judges.
The clear message of Carrera is that when plaintiffs file class
actions that have no hope of compensating class members for alleged
wrongs because the class members can't be found, courts should
refuse to let these actions proceed.

As we discuss below, the denial of rehearing is significant in
itself, given the concerted efforts by Carrera and his amici to
draw attention to the case. But what might be most significant
about this latest set of opinions is what even the dissenting
judges did not say.

First, here's some brief background about the case. Carrera
filed a class action against Bayer alleging that the company
overstated the health benefits of its One-A-Day WeightSmart
multivitamin. He sought to represent a putative class of all
consumers who ever purchased WeightSmart in Florida. The district
court granted class certification, but the Third Circuit granted
Bayer's petition for review under Rule 23(f) and reversed.

The problem for Carrera, the Third Circuit explained, is that
there is no reliable way to ascertain who the class members are.
WeightSmart was sold at CVS and other retail stores throughout the
state, rather than purchased directly from Bayer, so the company
did not—and could not—have a "master list" of
customers who bought the product. There's no indication that
the retailers kept records of which customers purchased
WeightSmart, and even if some purchasers might be identified
through loyalty cards or online purchases, that list would be
grossly incomplete. Few if any customers are likely to have saved
receipts or proofs of purchase documenting each of their vitamin
purchases. And Bayer stopped selling WeightSmart in Florida in
January 2007, but the class was not certified until November 2011,
so it is especially unlikely that reliable records exist for
purchases made many years ago.

Recognizing this difficulty, Carrera's petition for rehearing en banc (pdf)
essentially challenged the premise that ascertainability should be
taken seriously. In Carrera's view, it's apparently not
necessary for a plaintiff bringing a consumer class action to be
able to identify who the class members actually are. Instead,
Carrera proposed that the defendant's aggregate liability could
be measured based on total sales or revenues (without knowing whom
the product was sold to); any class members capable of proving
their purchases would be allowed to submit a claim and receive
payment; and then the remaining amount—belonging to class
members who could not be identified—would escheat to a state
unclaimed-property fund (minus a cut for the lawyers). Under this
approach, Carrera argued, the absence of any reliable way to
identify class members has no bearing on Bayer, because its total
liability would be the same no matter how the damages are
ultimately distributed. And as for the fact that few class members
would be compensated directly by a judgment or settlement in the
case, Carrera viewed this to be of no moment at all.

Four judges dissented from the full court's decision to deny
the petition, but for a very different reason. According to the
dissent, the ascertainability requirement could be satisfied in
this case because some class members "could be determined by
records from loyalty card programs and online purchasing
receipts" and "the remaining may be found through
affidavits" averring (without actual proof) that the signer
purchased the product. But the en banc court was correct to dismiss
that argument and deny rehearing. Rule 23 requires that a plaintiff
seeking class certification "affirmatively demonstrate his
compliance with the Rule" and that courts conduct a
"rigorous analysis" before finding the requirements
satisfied. See, e.g., Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct.
2541, 2551 (2011). Carrera did not demonstrate that any retailer
records capable of identifying class members even exist, much less
that they are sufficiently comprehensive to ascertain class
membership. And allowing putative class members to assert
eligibility through conclusory affidavits, rather than through
actual evidence, cannot satisfy the ascertainability requirement,
much less comply with due process, because there would be no
meaningful way to verify whether each claim is truthful and
accurate or for the defendant to challenge those that are not.

What is most significant about the denial of rehearing, however,
is that none of the judges accepted Carrera's argument that
it's unnecessary to show that the vast majority of class
members can be identified for class certification. This rejection
of Carrera's approach puts the Third Circuit in good company:
Numerous courts have held the inability to prove individual damages
cannot be overcome (at least in a litigated class action, as
opposed to a settlement) by calculating damages an aggregate
basis—an approach sometimes referred to as "fluid
recovery"—and proposing a cy pres distribution of unclaimed funds. See,
e.g., McLaughlin v. Am. Tobacco Co., 522 F.3d 215,
232 (2d Cir. 2008); Windham v. Am. Brands, Inc., 565 F.2d 59, 72
(4th Cir. 1977); In re Hotel Tel. Charges, 500 F.2d 86, 91 (9th
Cir. 1974).

Had Carrera's approach been accepted, it would have marked a
radical change in how Rule 23 is supposed to work. At bottom, Rule
23 is simply an aggregation device that allows similarly situated
plaintiffs to obtain redress through a single lawsuit, rather than
requiring each individual to bring a separate suit. A Rule 23 class
action is the sum of the individual claims within it—nothing
more. If class members can't prove the elements of their
individual claims, then they can't use the class-action device
to skirt those requirements. To do so would violate the Rules Enabling Act, which forbids interpreting
Rule 23 to abridge, enlarge, or modify any substantive right. See
Wal-Mart, 131 S. Ct. at 2561; Klier v. Elf Atochem N. Am., Inc., 658 F.3d
468, 474 (5th Cir. 2011).

Underlying Carrera's argument—and necessarily rejected
by the Third Circuit—is an approach that sees plaintiffs'
lawyers not as attorneys seeking redress for their clients, but
instead as free-roaming attorneys general with self-appointed power
to prosecute purported violations of the law. Requiring proof of
damages for each class member, Carrera argues, might not fully
punish or deter alleged misconduct. But private lawyers are
empowered to bring claims and seek redress only to their extent
that their clients can prove a right to relief. If Carrera were
right that all that matters is aggregate damages and deterrence,
there would be no need for named plaintiffs at all.

Of course, as a practical matter, in many of today's class
actions the plaintiffs' lawyers are running the show and
recruiting clients, not the other way around. But as far as the law
is concerned, lawyers still can't recover damages without
identifying the individuals entitled to that relief. Nothing in
Rule 23 allows class actions to take on a life of their own and
demand damages not owed to any particular class member. The Third
Circuit was right to reject Carrera's "demand damages
first, identify plaintiffs later (or never at all)" approach.
Other courts should do the same—as indeed many already
have.

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